Question

Identify the ethical issues in each of the following situations and what your ethical obligations are, assuming you are faced with the dilemma.

a. A consultant for a CPA firm is ordered by her superior to downgrade the ratings of one company’s software package being considered for a client and increases the ratings for another company, which is run by the superior’s wife. What would you do and why?

b. A tax accountant is told by his superior to take a position on a tax matter that is not supportable by the facts in order to make the client happy. This is a common practice in the firm and the likelihood of the IRS questioning it is remote. Would you go along with your supervisor?

c. An auditor for a government agency concluded a contactor’s accounting system was inadequate; her supervisor changed the opinion to adequate in order to minimize the audit hours on the job and make the process seem more efficient. Would you go above your supervisor in this matter and bring your concerns to high-ups in the agency?

Answer 1

1. The consultant should not give any biased review under any circumstances , hence if he is forced by senior then he should highlight it to Top Management. The duty of a consultant should be assurance and audit without any bias. It is the responsibility of the consultant to disclose the related party interest and transactions if any, hence in this case consultant should disclose the other company is superior’s wife which is conflict of interest.
2. Tax accountant should always follow the tax rules and cannot do tax evasion inorder to make client happy. It is the duty of tax accountant to make the client aware of all the tax clauses applicable on it and suggest a fair practice of tax accounting. In this case I wont go with the supervisor but look for facts and tax rules.

3. Audit should be done with due diligence and fair view. In this case although auditor gave an unbiased view but supervisor changed his opinion report in favor of contractor which is unethical and the auditor must highlight this misconduct to high level management to keep your opinion clear to the management.